Texas Legislature 2019

Texas House approves property tax reform bill, setting up negotiations with the Senate

The House approved the bill designed to slow local property tax revenue growth, but made the bill contingent on the passage of a school finance bill, which is still pending in the Senate.

Under Speaker Dennis Bonnen, the Texas House has passed all three of state leaders' highest-priority bills for 2019.

Texas Legislature 2019

The 86th Legislature runs from Jan. 8 to May 27. From the state budget to health care to education policy — and the politics behind it all — we focus on what Texans need to know about the biennial legislative session.

 More in this series 

The Texas House gave preliminary approval to a priority property tax reform package Tuesday, teeing it up for negotiations with the Senate and impelling the upper chamber to act on an omnibus school finance measure.

Together, the education and tax overhaul bills have been the top policy issues of the 2019 legislative session, and they are ultimately expected to be ironed out behind the scenes — and perhaps simultaneously.

Tuesday’s vote marks a small milestone for House leadership, which has muscled its must-pass budget, public education and tax reform bills to passage, all before the last month of session begins. But the House and Senate will next need to reconcile notable differences among the three measures, and the upper chamber has yet to move the school finance bill out of committee.

"We have done our job in the House — and we have sent everything over to the Senate," said state Rep. Dan Huberty, R-Houston, author of the school finance bill.

Senate Bill 2 was approved on a 107-40 margin after a half-dozen hours of debate. More than 20 Democratic lawmakers broke party ranks to support the measure, which has garnered adamant opposition from city and county officials since its introduction.

A top imperative for state leaders, SB 2 offers wholesale reforms to the property tax system and limits the ability of cities, counties and other taxing units to raise property tax revenue. As passed, it forces cities, counties and emergency service districts to hold an election to approve raising 3.5% more property tax revenue than the previous year. Hospitals and community colleges have an 8% election trigger in the version passed by the House.

“Texas taxpayers are frustrated by rising property taxes. They're often confused by the process, and many are scared of losing their homes,” said state Rep. Dustin Burrows, the bill’s author and chair of the tax-writing Ways and Means Committee. While the bill makes the tax process more transparent, “it does not lower anyone's property taxes.”

“It was never designed to do that, and I've never promised anyone that it did,” said Burrows, a Lubbock Republican.

Few attempts to make major changes to the bill were successful Tuesday.

One amendment, from state Rep. Charlie Geren, R-Fort Worth, seems to bar anyone but licensed attorneys from representing taxpayers in the property tax appeal process on a contingency fee basis. The change would likely affect the author of SB 2, state Sen. Paul Bettencourt, a Houston Republican and a property tax consultant.

“It affects a lot of people. We'll talk about it in conference,” Geren said. He added, “I don't believe in contingency fees, but if we have to have contingency fees to do this, then I want the lawyers to do that."

Another change lets taxing units factor indigent health care costs into their revenue growth calculations.

Texas’ top Republicans, including Gov. Greg Abbott and the leaders of each chamber of the Legislature, have pushed for property tax and school finance reform since the beginning of the session, though the Senate has emphasized the former and House has accentuated the latter, if ever so slightly. Movement on both pieces of legislation slowed this month as both chambers eyed each other warily and waited for the other to move on its priorities.

House leaders have signaled that they believe property tax reform legislation should run on a parallel track with the school finance bill since the issues are so closely intertwined. Ahead of Tuesday’s debate on Senate Bill 2, Speaker Dennis Bonnen, R-Angleton, indicated this to the two party caucuses in separate meetings — signaling that the House won’t act any further on property tax reform negotiations until the Senate passes a school finance bill, according to multiple people with knowledge of the meetings.

House leaders have also reworked the property tax bill to make it contingent on school finance reform passing.

State Sen. Larry Taylor, R-Friendswood, said earlier Tuesday that the Senate Education Committee he chairs would likely not approve the school finance bill until Thursday or next week. But by the end of the day, that timeline had rapidly accelerated: The committee now plans to vote on the bill Wednesday morning.

Meanwhile, there are few differences between the House’s version of the property tax package and the bill passed by the Senate earlier this month. Perhaps the most significant point is that the House offers community colleges and hospitals an 8% election trigger, while the Senate has reduced it to 3.5%.

In addition, the Senate had required voters in small taxing units — those that bring in less than $15 million combined sales and property tax revenue — to opt in to some of the bill’s provisions. The House’s revision eliminated that definition and inserted a new allowance to let all taxing units increase their property tax levy by $500,000 without triggering an election.

The Senate also permitted the costs of providing indigent defense services to be factored into the revenue growth calculation. The House removed that language but included a similar clause that protects cities and counties from being penalized if they offer homestead exemptions to their residents.

Finally, the lower chamber’s version includes a provision that lets taxing units bank unused revenue growth for five years, allowing them to surpass the 3.5% trigger in some of them.

Currently, cities, counties and other taxing units can raise 8% more property tax revenue before their voters can petition for an election to roll back the increase. SB 2 would make those elections automatic and put in place a battery of reforms designed to increase transparency and utility for taxpayers.

State leaders had said property tax reform is necessary to protect Texans whose property tax bills are growing faster than their incomes. Abbott has said on Twitter that “skyrocketing property taxes must be fixed” and that a previous increase to the homestead exemption was quickly “eroded by rising appraisals and rates.

But Democrats and ultraconservative lawmakers have clamored for weeks over how much control the state should exercise over local property tax revenue growth and whether the bill should include school districts.

Schools levy the bulk of property taxes across Texas, and hard-right lawmakers and activists have argued property owners will feel no relief if schools are exempted from the bill.

The House initially tried to strip schools from the measure, saying its school finance bill, HB 3, was the appropriate vehicle. Burrows later reinserted schools into the property tax measure — with the caveat that it was a symbolic move that does “absolutely nothing” in practice.

“If we're going to have property tax reform, we can't do it with just cities and counties. We also have to do it for school districts,” Burrows said, referencing HB 3. But he said those changes need to be made in the state’s education code, not the tax code.

An attempt to decouple the property tax bill from the school finance legislations Tuesday earned an impassioned rebuke from Burrows and Huberty, who authored the school finance bill.

After the lawmakers suggested that passage of both bills was critical to meet the House priorities laid out at the start of the session, the amendment sank on a 143-5 margin. Even the speaker took the rare step of casting a vote in opposition.

The most consistent legislative opponents to the property tax reform effort have been Democrats, who have asked for a higher election trigger or for certain costs to be exempted from the calculation.

Efforts to exclude public safety expenses, economic development expenditures and spending on flood risk mitigation from the revenue growth calculation all failed to progress Tuesday.

City and county officials have also maintained the bill imposes an election trigger that is not practicable.

Fort Worth Mayor Betsy Price said that “a 3.5% revenue cap would create unintended consequences” and would “hamstring cities” without providing meaningful tax relief to residents.

Sylvester Turner, the mayor of Houston, which already operates under a revenue cap, also said the proposal would have little impact on taxpayers’ bills.

“Last year, revenue caps saved the average Houston homeowner less than $10 a month,” he said, “and resulted in 1,152 fewer police on the street.”

In a statement after the vote, Abbott applauded the bill’s passage and thanked Burrows and Bettencourt for their leadership.

“For too long, Texans have watched their property taxes skyrocket while being reduced to tenants of their own property. That is not the Texas way,” Abbott wrote. "In the final days of the legislative session, I am confident this historic legislation, combined with additional reforms working their way through the system, will reach my desk where I will sign them into law.”

Cassi Pollock and Aliyya Swaby contributed reporting.